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As you can imagine, it was all cheers, whistles and hurrahs from the audience when Apple (Nasdaq: AAPL) executives listed the features on the new iPhone 3G S during Monday's Apple Worldwide Developers Conference keynote. However, the accolades quickly turned to derisive laughter -- and even boos -- at nearly every mention of Apple's sole U.S. carrier partner, AT&T (NYSE: T).
That's largely because AT&T will not offer immediate support for multimedia messaging (MMS) and tethering (using the phone as a computer modem) when the new iPhone OS 3.0 software becomes available June 17. Never mind the fact that other smartphones offered by other carriers -- and AT&T itself -- have long offered those features. You'll have to wait a little while before you can enjoy those services on one of the most popular smartphones in the country, according to AT&T spokesperson Mark Siegel.
"In the case of MMS, we will be offering that by the end of the summer," Siegel told MacNewsWorld. "The reason is that we're now finalizing some system upgrades that are absolutely unrelated to our 3G network. I want to be very clear about that. We just want to complete that so our customers can have the best experience with MMS."
As far as tethering is concerned, "we will offer tethering -- we do offer it on a number of other devices. We've just not announced a date yet."
Asked whether the support delays will also involve new data plan charges for one or both features, Siegel offered no answer. However, the late support for two key features that iPhone users have been clamoring for since the first generation of the device -- as well as the audience reaction at the Moscone Convention Center -- highlight ongoing points of contention between customers and AT&T, and possibly between AT&T and Apple.
Troubled Waters in the iPhone Channel?
The media reform advocacy group Free Press is taking AT&T to task for not supporting MMS and tethering in the U.S. for the next-generation iPhone, even though those features will be available at launch in other countries. The exclusive nature of the carrier/hardware maker relationship is to blame, the group contends.
"Consumers are tired of wireless carriers impeding innovation instead of promoting it. Congress should unlock the mobile marketplace by putting an end to these exclusive deals," Free Press policy council Chris Riley said. "Cutting-edge wireless devices and applications have the potential to launch new industries and revolutionize everyday life. In this challenging economy, we cannot afford to allow AT&T or any other company to stand in the way of progress."
If that is indeed happening, it may be because hardware providers like Apple, feeling the heat of an increasingly competitive environment, rush to include new features that may strain carrier networks.
"This is something that's been happening for a while. It really is a battle between device vendors and operators," Chris Hazelton, research director for the 451 Group, told MacNewsWorld. "The device vendors are wanting to push all advanced features into a mobile device, and the carriers are saying, 'Whoa, wait a minute, we need to protect our current business models,' or 'I'm not ready to market that yet,' or 'We're not ready to price that yet.'"
Some Nokia (NYSE: NOK) and Motorola (NYSE: MOT) phones had to drop certain WiFi features at the behest of carriers, Hazelton noted. Verizon has forced removal of certain GPS features from some of its hardware partners.
"It's very frustrating for device vendors, who are trying to compete with other device vendors, to be blocked by their major channel partners," Hazelton said.
There is no friction caused by iPhone features colliding with AT&T support capabilities, according to AT&T's Siegel. To drive his point, he cited company figures that most other smartphone makers and carriers would love to brag about: 5.9 million iPhone customers activated in Q1 '09; average monthly spending for an iPhone customer 
that's 1.6 times higher than other smartphone users; 40 percent of iPhone customers coming from other carriers.
"All those results would be impossible if the network wasn't there. It is a great partnership and a great relationship for us. I think Apple would say the same thing about us. Our network is absolutely ready to support the iPhone. It is ready and getting more robust. We feel good about where the network is," Siegel said.
Possible Openings for Rivals?
It seems that every carrier has users who will complain about dropped calls and other service issues, and certainly AT&T is not immune from that aspect of the business. It's also hearing speculation about just how much longer its exclusive agreement with Apple will last, according to Kevin Burden, research director for ABI Research.
"Do I think AT&T is holding [Apple] back? That's tough to say, given the position the iPhone is in, where it is in terms of the smartphone market," Burden told MacNewsWorld. "I think what's surprising is, with so much more competition among mobile operators here than in most countries around the world, we haven't had the same type of carrier consolidations that other countries have. It's a little surprising that AT&T doesn't hop on with the high-end Apple support. It's either a network issue or their timing is off."
In AT&T's defense, a new iPhone and a new iPhone operating system upgrade sell themselves, Burden added, so AT&T's strategy may indeed be to slowly trickle out its feature support instead of "blowing it all out in the first wave."
Indeed, Seigel emphasized that "it's a matter of when, not if" with iPhone 3.0 feature support.
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